User:Oceanflynn/sandbox/2015 Flash Crash

The August 24 2015 Flash Crash also called the August 24-25 2015 stock market selloff was a brief bear market flash crash in global stock indices and "hundreds of billions were wiped off the world’s financial markets." The stock indices tumbled and the Dow Jones Industrial Average "dropped roughly 1,100 points in the first five minutes of trading" on Monday, August 24 and "ended the day down 588 points." According to an analyst at JPMorgan there was a sudden "large drop in equities in Asia" on Sunday evening which triggered the "drop in index futures in Europe" and the 7% drop in U.S. U.S. stock futures before the U.S. stock market opened on Monday morning. According to a December 6, 2015 article in the Wall Street Journal "the price of many ETFs appeared to come unhinged from their underlying value." As a result of the crash, ETFs were put under even greater scrutiny by regulators and investors. New regulations put in place following the 2010 Flash Crash — when prices of Exchange-traded funds (ETFs) and other stocks and options became volatile with trading markets spiking  and bids falling as low as a penny a share in what the Commodity Futures Trading Commission (CFTC) investigation described as one of the most turbulent periods in the history of financial markets. — proved to be inadequate to protect investors in the August 2015 flash crash. Analysts at Morningstar claim that,

""ETFs are a 'digital-age technology' governed by "Depression-era legislation.""

- Morningstar December 6, 2015

August 23-August 25, 2015
By midday August 23, the SSE had lost 8.5% of it value, the worst since 1997 Asian financial crisis. As a result, billions of pounds were lost on international stock markets with some international commentators labeling the day Black Monday. The Shanghai Composite Index dropped "8,5% in the biggest selloff since 2007."

During the 45 minutes before the market normalized "more than 1,250 trading halts were triggered" with "each lasting for a minimum of five minutes." During the panicked selloff, at their lowest points, the S&P 500 Index fell by 5.3 per cent, iShares Core S&P 500 ETF fell 26 per cent, the Guggenheim S&P 500 Equal Weight ETF fell 43 per cent and the iShares S&P TSX Capped Financials Index Fund fell by as much as 27 per cent.

From the high to low for 2015 on August 24 Chevron's stock fell 48.5% to $69.58, Caterpillar fell 45.9% to $62.99, Du Pont fell 38.5% to $47.11, General Electric fell 37.3.3% to $19.37, Exxon Mobil fell 36.3% to $66.55, Intel fell 34.4% to $24.87, Verison fell 29.5% to $38.06, Pfizer fell 21.9% to $28.47 and Disney's stock traded as low as $90, dropping over 26% after having reached its all time high in August 4th.

According to Forbes The Dow Jones Industrial Average experienced its all-time intraday high of $18,351.36 on May 19, 2015 then fell to $15,370.33 during the August 24 flash crash representing a technical correction of 16.2%.

"[T]he Dow Jones was some 10% down over two trading days while even the local Top40 Index was off almost 8% over the Friday/Monday selloff period."

"[T]he rand traded at its worst level ever as it briefly went through R14/USD, breaching the R13.61/USD worst level from December 2001."

There were similar losses of over 7% on 25 August causing some commentators to call it Black Tuesday.

The build-up to Black Monday
On August 21, 2015 the American investors suffered the "worst one-day drop since 2008" in a panicked selloff that left the Standard & Poor's 500 down 3.2% to 1,970.89. The Nasdaq composite index, "which has a lot of technology stocks, dropped 3.5% to 4,706.04."

Some consider the The Black Monday flash to be a major aftershock of the 2015 Chinese stock market crash. Chinese stocks began to experience a "period of extreme volatility beginning in May 2015" and the the Shanghai Composite Index (SSE), China's main stock exchange, reached its peak on June 12th. To prevent further losses, on July 7th China Securities Regulatory Commission imposed severe limits on stock market selling. "[T]rading in over 90% of the 2,774 shares listed on Chinese exchanges" was suspended or halted. The China Securities Regulatory Commission By July 11th the SSE was down 25 percent, the "smaller, tech-dominated exchange" Shenzhen Stock Exchange (SZSE) was down 35 percent and investors had lost "about $3.5 trillion, equal to China’s total market capitalization in 2012." ChiNext, a NASDAQ-style board of the SSE, which had opened in 2009 had 464 firms listed by June 2015. During the July crash, Hong Kong’s Hang Seng index closed at almost 6% down, its biggest one-day drop since 2008.

By September 2015 the Shanghai Composite Index (SCI), had "lost more than 40 %" of its market capitalization.

Consequences
By December 2015, China's Stock Regulatory Commission approved a plan to launch trading curb or stock index circuit breakers on the Shanghai Stock Exchange, Shenzhen Stock Exchange and China Financial Futures Exchange on January 1, 2016.

China Purchasing Managers Index
""The Caixin PMI is a closely-watched gauge of nationwide manufacturing activity, which focuses on smaller and medium-sized companies, filling a niche that isn't covered by the official data.""

- CNBC January 3, 2016

In August 2015, Caixlin Media Co Ltd announced that the China Purchasing Managers' Index (PMI) had declined to 51.5. This was the beginning of a decline that continued into December 2015. , PMIs are economic indicators derived from monthly surveys of companies is produced by the financial information firm, Markit Group, which compiles the survey and conducts PMIs for over 30 countries worldwide. From 2010 to 2015 HSBC had sponsored Markit's China PMI, but that relationship ended in June and Caixin stepped in.

Since China is the world's largest metal consumer and producer, and " the world’s second largest economy", the China PMI is closely watched.

When Caixin PMI came in weaker in late December 2015 fresh fears over China's economic growth were triggered and markets around the region responded. China's CMI had fallen to 48.2 from 48.6 in November, 48.3 in October, 50.5 in September and 51.5 in August.

On Friday, January 1, 2016 The Guardian reported that China's factory activity continued to decline, overseas demand for goods fell and export orders for Chinese manufacturers fell. Stock markets which had already responded by mid-December with "metals [experiencing] a broad-based drop on the weakness of manufacturing activity in China, . According to the "OPEC Monthly Oil Market Report" published on December 10, 2015, manufacturing in China – the world's largest metal consumer and producer  –  had a Purchasing Managers' Index (PMI) was 48.6 in November and 48.3 in October, September is 50.5, August 51.5. According to the Institute for Supply Management (ISM), which conducts PMIs, the US had a PMI of 48.6 in November from 50.1 in October. Whereas China has experienced a gradual decline since late 2014, the United States last decline was in November 2012

In October 2015 Caixin China General Services PMI reported that "Chinese business activity [had declined]" at its "quickest rate since start of 2009.

""In the group of non-energy commodities, metals experienced a broad-based drop on the weakness of manufacturing activity in China while agriculture prices were also generally down. Precious metals showed their largest drop since 2013 on firmer expectations of interest rate hikes in the US."

- "OECD December 2015

A private survey showed that factory activity in China, the world's biggest metals consumer, contracted for the 10th straight month in December and at a sharper pace than in November, dampening hopes the Chinese economy would enter 2016 on steadier footing.

On January 4, 2016, reports of "weak Chinese economic data reignited fears of a global slowdown" and "U.S. stock indexes tumbled about 2 percent."

During the first fifteen minutes of the first day of trading in the Chinese stock exchange, the stock market fell by 5% before leading regulators halted trading. It was reopened for another fifteen minutes and stocks fell until trading was again halted. Leading regulators let shares fall for another fifteen minutes before ending trading early." "The blue-chip CSI 300 Index dropped 7% while the benchmark Shanghai Composite index fell 6.9%. The technology-heavy Shenzhen Composite was the worst performer and fell by more than 8%."

Previous flash crashes
Black Monday refers to Monday, October 19, 1987 when global stock exchanges around the world plummeted in a matter of hours with stock values falling first at the Hong Kong Stock Exchange, then in Europe. Then the Dow Jones Industrial Average (DJIA) fell "22.6 percent in a single trading session, representing "the largest one-day stock market decline in history." "New Zealand’s stock market fell 60 percent." After Black Monday, regulators developed new rules, known as "circuit breakers", allowing exchanges to temporarily halt trading in instances of exceptionally large price declines in some indexes; for instance, the DJIA.

There was a May 6, 2010, Flash Crash on May 6, 2010 On May 6, 2010, U.S. stock markets opened and the Dow was down, and trended that way for most of the day on worries about the debt crisis in Greece. At 2:42 p.m., with the Dow down more than 300 points for the day, the equity market began to fall rapidly, dropping an additional 600 points in 5 minutes for a loss of nearly 1,000 points for the day by 2:47 p.m. Twenty minutes later, by 3:07 p.m., the market had regained most of the 600-point drop. A $4.1 billion trade on the NYSE resulted in a loss to the Dow Jones Industrial Average of over 1000 points and then a rise to approximately previous value, all over about fifteen minutes. The mechanism causing the event has been heavily researched and is in dispute. On April 21, 2015, nearly five years after the incident, the U.S. Department of Justice laid "22 criminal counts, including fraud and market manipulation" against Navinder Singh Sarao, a trader.The Commodity Futures Trading Commission (CFTC) investigation concluded that Sarao "was at least significantly responsible for the order imbalances" in the derivatives market which affected stock markets and exacerbated the flash crash. A hoax AP tweet on April 23, 2013 claiming the White House was attacked and President Obama was injured caused a flash crash with a fall of 130 points from the Dow Jones Industrial Average and removal of $136 billion from S&P 500 index. Although all executed trades were considered final, the Dow Jones later restored its session gains.

On August 8, 2011 also called Black Monday US and global stock markets crashed when Standard and Poor's downgraded downgraded the United States credit rating on sovereign debt from AAA, or "risk free", to AA+. It was the first time in history the United States was downgraded. Moody's issued a report during morning trading which said their AAA rating of U.S. credit was in jeopardy, this after issuing a negative outlook in the previous week. By market close, the Dow Jones Industrial Average lost 634.76 points (-5.55%) to close at 10,809.85, making it the 6th largest drop of the index in history. Black Monday 2011 followed just one trading day behind the 10th largest drop of the Dow Jones Index, a 512.76 (-4.31%) drop on August 4, 2011.